Churchill Knight & Boox clients being investigated as Managed Service Companies

[tenten]

Thanks for your reply. But I meant more in terms of each step. There are multiple gateways to pass through before (if it gets to) tribunal. When should the next one be?

I doubt anyone could answer that with any authority - it would be finger in the air guestimates. If there is a meaningful and funded challenge to the CK/Boox assertions, using CBS as a reference point and assuming we are already 3 years into this, then probably 2-3 years from here to get to FTT. Another 1-2 years after that for UTT.

[Fred Bloggs]

I can't see a longer game because HMRC hardly need any bigger ammo to work with ( at the moment determine salary v dividends is seemingly enough to be an MSC). So it's either something in the portals has annoyed them or incompetence.

And I don't buy the incompetence as by only starting a case against just 2 firms HMRC have lost the opportunity to recover a significant £x0ms+ from other firms.

We are going to find out. Myself, I think it is a longer game and these two cases will determine which other firms are going to be caught as the next in line. I agree though, there's many millions at stake here. Far more here than an ad-hoc IR35 investigation that costs more than it'll ever raise.

[DealorNoDeal]

I guess the first step should be the appeal (which most have probably launched).

Then if this is not favourable there is the option of a "review" which should be concluded within 45 days:
https://www.gov.uk/tax-appeals/revie...b>decision</b>
"Reviews usually take 45 days, but HMRC will contact you if it will take longer."

Then there's the dreaded tribunals...


Hopefully at least some of us can get out via the initial appeal and review channels. Let's see.

HMRC will only issue a decision to the handful of contractors it wishes to take to tribunal. Only these contractors would be able to request a (pretty pointless) review.

The vast majority will just have their appeals left pending.

[enda1]

HMRC will only issue a decision to the handful of contractors it wishes to take to tribunal. Only these contractors would be able to request a (pretty pointless) review.

The vast majority will just have their appeals left pending.

Ok cheers for theat. Was not obvious to me reading the correspondence from HMRC

[tenten]

We are going to find out. Myself, I think it is a longer game and these two cases will determine which other firms are going to be caught as the next in line. I agree though, there's many millions at stake here. Far more here than an ad-hoc IR35 investigation that costs more than it'll ever raise.

It will be interesting to see if they pause for the CK/Boox cases to progress before launching enquiries against other targets (if they have not already done so). I have no idea what capacity they have and if it would be even remotely adequate to tackle the number of PSCs that could be targetted across similar accountancy providers.

[Sijo]

Another contractor who caught with this move. I have also got the determination for the period I was with Boox. Just wondering what will happen once I file the appeal? Boox agreed to do the appeal on our behalf.

[RP1234]

Another contractor who caught with this move. I have also got the determination for the period I was with Boox. Just wondering what will happen once I file the appeal? Boox agreed to do the appeal on our behalf.

It'll be the waiting game, HMRC will take their time with it..... I'm sure they are under-resourced right now.

[jamesbrown]

The WTT presentation was interesting and useful. In short, their analysis is aligned with my own, but there were some interesting details too.

They agree that the accounting exemption in clause (3) is live and probably applies, in reality, for a vast majority of these recent cases even though not acknowledged by HMRC. They agree that FA with an accountant review/input would meet the exemption to the best of their knowledge ("if this didn't meet the exemption, what would?"). However, the closer the relationship is to algorithmic or automated and the further away it is from accounting advice provided by a personal accountant (to be reviewed and accepted), then the more likely this exemption would not apply. This exemption is sufficient for all of (2) to be irrelevant w/r to being "involved with", so it really is the first gate. Again, not acknowledged by HMRC and they were uncertain why, beyond the obvious (facts not aligned with their strategy, which is to probe the line).

They agree that CBS is barely relevant to the facts presented for a majority affected by these recent claims, despite being the benchmark for current MSC case law (since it made it all the way to the CoA). In their words, CBS was a "slam dunk" for the MSC legislation.

As noted elsewhere, conditions (2)(a/c/d) are the ones noted across all determination letters and hence most important. Condition (2)(a) is highly unlikely to apply to the mere payment of an annual/monthly fee for reasons discussed elsewhere in this thread. Condition (2)(d) is unlikely to be met unless the accountant controlled the bank account and made payments directly.

Condition (2)(c) sounds like the most ambiguous one. Their view on condition (2)(c) is that being advised on optimal pay is clearly distinct from being instructed on what payments to make, the latter being a pointer towards an MSCP/MSC.

Condition (2)(e) may be a problem if your accountant offered tax loss insurance and you took it.

They noted the draconian debt transfer rules and the fact that a mere association with the MSC could be enough to transfer a debt (in other words, transferring assets to a partner is a complete waste of time).

They noted that the legislation is silent about CT paid, but dividend taxes could be reclaimed against the deemed payment, assuming the time limits were met (they mentioned 5 years).

They asserted that a Reg 80 determination couldn't be issued to a closed company and hence the debt transfer provision couldn't kick-in in that situation, but that HMRC can restore a company.

They made one assertion that sounds wrong to me, namely that the deemed payment calculation is based on salaries/dividends actually paid and not the payments made to the PSC in respect of work performed by the individual. That is not how it works with the IR35 deemed payment (Chapter 8) and I think it's the same for Chapter 9 (MSC), but I will need to double-check. I challenged them via a chat/question, but they didn't answer it.

[mudskipper]

21st April for an IPSE webinar where this will be a major topic. https://www.ipse.co.uk/event/ir35-on...-answered.html

[GregRickshaw]

They noted the draconian debt transfer rules and the fact that a mere association with the MSC could be enough to transfer a debt (in other words, transferring assets to a partner is a complete waste of time).

Thanks James, I missed the webinar but I am very grateful of your notes and the detailed amount of data you have given us, interesting this though as the letter from HMRC clearly states the debt would not transfer to a partner just because they happened to be married to the MSC director (debtor).